Shared.com v. Meta Platforms, Inc.

• Decision Date: 21 September 2022
• Docket Number: 22-cv-02366-RS
• Parties: SHARED.COM, Plaintiff, v. META PLATFORMS, INC., Defendant.
• Court: U.S. District Court — Northern District of California

SHARED.COM, Plaintiff,
v.
META PLATFORMS, INC., Defendant.

No. 22-cv-02366-RS

United States District Court, N.D. California

September 21, 2022

ORDER GRANTING IN PART AND DENYING IN PART DEFENDANT'S MOTION TO DISMISS FIRST AMENDED COMPLAINT

RICHARD SEEBORG CHIEF UNITED STATES DISTRICT JUDGE

I. INTRODUCTION

Plaintiff Shared.com (“Shared”) is an online content creator that was, for many years, deeply engaged in the Facebook advertising ecosystem. This suit arose following a series of alleged incidents that effectively barred Shared from using, advertising on, and monetizing from the social media platform. The operative First Amended Complaint (“FAC”) avers breach of contract, misrepresentation, and several other acts of misconduct by Defendant Meta Platforms, Inc. (“Meta”). Meta now moves to dismiss the FAC for failure to state a claim.

The motion is granted in part and denied in part. Some of Plaintiff's claims are barred by section 230(c)(1) of the Communications Decency Act. The remaining claims, however, have been adequately pleaded.

II. BACKGROUND^[1]

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Shared is a partnership based out of Ontario, Canada that “creates and publishes original, timely, and entertaining [online] content.” Dkt. 21 ¶ 9. In addition to its own website, Plaintiff also operated a series of Facebook pages from 2006 to 2020. During this period, Shared avers that its pages amassed approximately 25 million Facebook followers, helped in part by its substantial engagement with Facebook's “advertising ecosystem.” This engagement occurred in two ways. First, Shared directly purchased “self-serve ads,” which helped drive traffic to Shared.com and Shared's Facebook pages. Second, Shared participated in a monetization program called “Instant Articles,” in which articles from Shared.com would be embedded into and operate within the Facebook news feed; Facebook would then embed ads from other businesses into those articles and give Shared a portion of the ad revenue. Shared “invested heavily in content creation” and retained personnel and software specifically to help it maximize its impact on the social media platform. Id. ¶ 19.

Friction between Shared and Facebook began in 2018. Shared states that it lost access to Instant Articles on at least three occasions between April and November of that year. Importantly, Shared received no advance notice that it would lose access. This was contrary to Shared's averred understanding of the Facebook Audience Network Terms (“the FAN Terms”), which provide that “[Facebook] may change, withdraw, or discontinue [access to Instant Articles] in its sole discretion and [Facebook] will use good faith efforts to provide Publisher with notice of the same.” Id. ¶ 22; accord Dkt. 21-5. Shared asserts that “notice,” as provided in the FAN Terms, obliges Facebook to provide advance notice of a forthcoming loss of access, rather than after-the-fact notice.

During this same timeframe, Facebook also failed to make a timely payment from Instant Articles ad revenue. Another clause in the FAN Terms (“the FAN payment term”) provides that Facebook would forward money earned through Instant Articles “approximately 21 days following the end of the calendar month in which the transaction occurred.” Dkt. 21 ¶ 26; accord

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Dkt. 21-5. Facebook delayed paying Shared its portion of April 2018 ad revenue until September 2018, roughly four months beyond the timeframe noted in the FAN payment term. This delay led to a critical shortage in Shared's operating capital, ultimately resulting in its decision to lay off eighteen employees.

Meanwhile, all was not well with Shared's self-serve ad buys. Shared notes that, “[o]ver the course of its relationship with Facebook, Shared had numerous ads arbitrarily and incorrectly rejected without explanation.” Dkt. 21 ¶ 47. Facebook's Advertising Policies, which governed the self-serve ad program, had provided that if an ad was rejected, Facebook would send the publisher “an email with details that explain why. Using the information in [the] disapproval email, you can edit your ad and create a compliant one.” Id. ¶ 45; accord Dkt. 21-4, at 2. Shared expected to receive specific explanations when its ads were rejected, but each time it instead received a “circular” explanation simply stating that the ad had been rejected for failing to comply with the Advertising Policies. Dkt. 21 ¶ 102.

All of these tensions were brought to a head in October 2020 when Facebook “unpublished the Shared Facebook pages, suspended Shared's ability to advertise,” and disabled Shared's ad accounts as well as the personal Facebook profiles of several Shared employees. Id. ¶ 42. While the Facebook Terms of Service stated that accounts could be suspended only after “clearly, seriously or repeatedly” breaching Facebook's policies, id. ¶ 49, Shared states that, to its knowledge, it had not violated any such policies. These actions “effectively gave Shared a death sentence within the Facebook system,” resulting in its business and its multimillion-dollar valuation “cratering.” Id. ¶¶ 43, 51.

Shared sued Meta, Facebook's parent company, in July 2022. The FAC raises six claims for relief, some of which have multiple factual bases. First, Shared avers that Meta committed conversion (Claim 1), breach of contract (Claim 3), and breach of the implied covenant of good faith and fair dealing (Claim 4) in suspending access to Shared's Facebook pages, contrary to the Facebook Terms of Service. Second, Shared avers that Meta committed breach of contract (Claim 3), breach of the implied covenant of good faith and fair dealing (Claim 4), and intentional

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misrepresentation (Claim 5) or negligent misrepresentation (Claim 6) for failing to provide advance notice of suspension from Instant Articles, contrary to the FAN Terms. Third, Shared avers that Meta committed breach of contract (Claim 3), intentional misrepresentation (Claim 5) or negligent misrepresentation (Claim 6), and violated California's Unfair Competition Law (“UCL”) (Claim 2), see Cal. Bus. & Prof. Cod § 17200, for failing to provide sufficient details regarding ad rejections in violation of the Advertising Policies. Fourth, Shared avers that Meta committed breach of contract (Claim 3) for failing to deliver the April 2018 payment on time in violation of the FAN payment term. Meta now moves to dismiss the FAC in its entirety.

III. LEGAL STANDARD

Federal Rule of Civil Procedure 12(b)(6) governs motions to dismiss for failure to state a claim. A complaint must include “a short and plain statement of the claim showing that the pleader is entitled to relief.” Fed.R.Civ.P. 8(a)(2). While “detailed factual allegations” are not required, a complaint must have sufficient factual allegations to “state a claim to relief that is plausible on its face.” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (quoting Bell Atlantic v. Twombly, 550 U.S. 544, 570 (2007)). When evaluating such a motion, courts generally “accept all factual allegations in the complaint as true and construe the pleadings in the light most favorable to the nonmoving party.” Knievel v. ESPN, 393 F.3d 1068, 1072 (9th Cir. 2005). However, “[t]hreadbare recitals of the elements of a cause of action, supported by mere conclusory statements, do not suffice.” Iqbal, 556 U.S. at 678.

For actions sounding in fraud, the complaint “must state with particularity the circumstances constituting fraud or mistake.” Fed.R.Civ.P. 9(b). Such averments “must be accompanied by ‘the who, what, when, where, and how' of the misconduct charged,” such that they are “specific enough to give defendants notice of the particular misconduct.” Kearns v. Ford Motor Co., 567 F.3d 1120, 1124 (9th Cir. 2009) (first quoting Vess v. Ciba-Geigy Corp. USA, 317 F.3d 1097, 1106 (9th Cir. 2003); and then quoting Bly-Magee v. California, 236 F.3d 1014, 1019 (9th Cir. 2001)). Knowledge may be pleaded generally under Rule 9(b), but the complaint “must set out sufficient factual matter from which a defendant's knowledge of a fraud might reasonably

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be inferred.” United States ex rel. Anita Silingo v. WellPoint, Inc., 904 F.3d 667, 679-80 (9th Cir. 2018).

IV. ANALYSIS

To survive Defendants' motion to dismiss, each of Plaintiff's claims must overcome three hurdles: first, they must not be barred by section 230(c)(1) of the Communications Decency Act; second, they must not be barred by the Limits on Liability within the Facebook Terms of Service; and third, they must be sufficiently pled. After reviewing the FAC, not every claim can overcome all three, so each hurdle is addressed in turn.

A. Section 230(c)(1) Immunity

Congress passed the Communications Decency Act in an effort to create and promote a vibrant digital communications landscape. Among other things, section 230(c)(1) of the Act generally exempts “information content providers” from liability for information provided by third parties. See, e.g., Barnes v. Yahoo!, Inc., 570 F.3d 1096, 1099-100 (9th Cir. 2009). The section states that “[n]o provider or user of an interactive computer service shall be treated as the publisher or speaker of any information provided by another information content provider.” 47 U.S.C. § 230(c)(1). While this immunity is broad, it is not absolute. As the Ninth Circuit clarified in Barnes v. Yahoo!, Inc., the relevant inquiry is not how plaintiffs style their claims for relief, but rather “whether the duty that the plaintiff alleges the defendant violated derives from the defendant's status or conduct as a ‘publisher or speaker.'” 570 F.3d at 1102. If the plaintiff alleges that liability arises from the defendant's “manifest intention to be legally obligated to do something,” rather than from the defendant's “status or conduct as a ‘publisher or speaker,'” section 230(c)(1) does not apply. Id. at 1107; see In re Zoom Video Commc'ns. Inc. Privacy Litigation, 525 F.Supp.3d 1017, 1034 (N.D. Cal. 2021).

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